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Using the Treasury Inflation Protected Securities for March 26, 2020 to complete the following table and to answer questions 2 and 3. Real rate Implied

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Using the Treasury Inflation Protected Securities for March 26, 2020 to complete the following table and to answer questions 2 and 3. Real rate Implied YTM Security Maturity inflation of return (%) rate in the (%) market (%) - 2 Years (maturities match exactly and close to two years out) Treasury note/bond 4/15/2022 0.260 TIPS 4/15/2022 - 5 Years (maturities do not match exactly and are not exactly five years out, but close) Treasury 1/31/2025 note/bond (use 2.500 coupon) 0.474 TIPS 1/15/2025 (use 2.375 coupon) 2. Assume Bill believes with 100% certainty that the inflation rate will be 0.250% over the next 2 years. If Bill wants a 2-year investment, should he buy the Treasury note/bond or TIPS? 3. Assume Bill believes with 100% certainty that the inflation rate will be 0.250% over the next 5 years. If Bill wants a 5-year investment, should he buy the Treasury note/bond or TIPS? Using the Treasury Inflation Protected Securities for March 26, 2020 to complete the following table and to answer questions 2 and 3. Real rate Implied YTM Security Maturity inflation of return (%) rate in the (%) market (%) - 2 Years (maturities match exactly and close to two years out) Treasury note/bond 4/15/2022 0.260 TIPS 4/15/2022 - 5 Years (maturities do not match exactly and are not exactly five years out, but close) Treasury 1/31/2025 note/bond (use 2.500 coupon) 0.474 TIPS 1/15/2025 (use 2.375 coupon) 2. Assume Bill believes with 100% certainty that the inflation rate will be 0.250% over the next 2 years. If Bill wants a 2-year investment, should he buy the Treasury note/bond or TIPS? 3. Assume Bill believes with 100% certainty that the inflation rate will be 0.250% over the next 5 years. If Bill wants a 5-year investment, should he buy the Treasury note/bond or TIPS

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